The insatiable energy appetite of AI data centers is pushing the United States' largest power grid to its operational limits.
On July 15th Eastern Time, the PJM Interconnection, the nation's biggest grid operator, announced results for its 2028/2029 Base Residual Auction (BRA). This grid serves over 67 million customers across 13 states and Washington D.C. According to a report, this marks the third consecutive auction where PJM has failed to meet its reliability target, with a supply shortfall reaching 6.8 gigawatts.
The widening gap is driven by the relentless surge in demand from data centers. Joseph Bowring, President of PJM's Independent Market Monitor, Monitoring Analytics, stated that data centers have already increased power supply costs within PJM by over 60%. The costs attributed to data centers in this single auction alone amounted to $6.3 billion. When combined with data from the previous three auctions, the cost burden on PJM's electricity consumers from data centers nears $30 billion.
Scale of the Shortfall: Equivalent to Seven Nuclear Plants
The latest auction procured 138,318 megawatts of capacity. Adding 10,864 megawatts from Fixed Resource Requirement (FRR) areas brings the total to approximately 149,182 megawatts. However, this remains 6,831 megawatts below PJM's reliability requirement.
To put 6.8 gigawatts into perspective, it is roughly equivalent to the output of nearly seven traditional nuclear power plants.
More notably, this is the third consecutive time in PJM's history that the entire region has failed to meet its reliability standard. The shortfall for the previous year (2027/2028) was about 6,500 megawatts, indicating the gap is widening annually.
PJM stated in a release, "A capacity shortfall does not necessarily mean the system cannot operate reliably, but it does mean PJM will have to operate with a thinner reserve margin and at a higher risk level."
Prices Hit the Ceiling, Consumers Are Already Paying
The clearing price for this auction hit the Federal Energy Regulatory Commission (FERC)-approved price cap of $325 per megawatt-day, a cost that will be directly reflected in consumers' monthly electricity bills.
The existence of this price cap is itself a mitigated form of bad news. PJM disclosed that without the cap, the auction clearing price would have reached $554.72 per megawatt-day, and even exceeded $776 in the Chicago area. In other words, without price controls, electricity prices would be approximately 70% higher than current levels.
The total payout to power generators from this auction was $16.4 billion, matching the record set at the end of 2025.
However, the price cap is a double-edged sword. PJM noted that while it protects consumers, it also weakens the market's price signal to incentivize the construction of new generation facilities—if generators don't see a high enough return, they won't accelerate building new plants.
AI Demand: Supply Simply Can't Keep Pace
The PJM grid is home to Virginia's "Data Center Alley," the region with the highest density of data centers in the United States.
According to a Monitoring Analytics report, electricity prices in PJM surged 76% year-over-year in the first quarter of this year, a direct result of explosive data center demand growth.
Claire Lang-Ree, a climate and energy advocate at the Natural Resources Defense Council, stated bluntly, "This year's auction results confirm an unacceptable trend: data center load growth is outpacing new power supply, reliability is declining, and prices are consistently hitting the cap. New power supply simply cannot keep up with the speed of data center load growth, and everyone is paying the price."
PJM CEO David Mills also acknowledged the situation is "unsustainable," adding, "These auction results demonstrate that growth in electricity demand continues to outpace growth in electricity supply. PJM is working with government and industry leaders on multiple fronts to bring new generation resources online quickly while managing the growth of new load on the grid."
Contingency Plan: Making Hyperscale Tech Companies Pay
Faced with the persistently widening supply-demand gap, PJM plans to initiate a special "Backstop Procurement" procedure this September to address near-term capacity shortfalls.
The core logic of this mechanism is to shift the cost burden of new generation onto hyperscale technology companies, rather than continuing to pass it on to ordinary consumers. According to reports, PJM has not yet submitted a specific plan, but under strong pressure from the White House and state governors, the procedure is set to launch in September. PJM must file the necessary documents with FERC by the end of this month.
Joseph Bowring went further, advocating that the grid should hold separate auctions specifically for data centers "so consumers don't have to pay for the extra costs."
Edison Electric Institute President Drew Maloney stated, "PJM customers are facing both high capacity costs and the risk of insufficient supply. America's electric power companies work every day to keep costs down and electricity bills as affordable as possible, but we need to move quickly on reforms while advancing the special measures currently underway to build more of all types of electric infrastructure across the region."
On July 23rd, FERC will convene a special meeting to discuss grid governance issues, where the pressure on PJM is expected to intensify further.
Comments